DOE’s proposed rule does not support grid resiliency and fuel diversity

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DOE’s proposed rule does not support grid resiliency and fuel diversity

The American Public Power Association urged the Federal Energy Regulatory Commission to reject the U.S. Department of Energy’s proposed rule requiring organized electricity markets to adopt tariff changes that would ensure full cost recovery for certain “fuel-secure” resources.

While we agree that DOE’s proposed rule has raised important questions that the industry should study further, the proposed rule is ambiguous and incomplete in many respects, and unworkable in its current form. In comments filed with FERC today, the Association asked FERC to terminate the proposed rule docket rather than proceed with an ill-defined and hastily-promulgated rule.

“The DOE’s directive to FERC proposes extreme measures that will impose significant costs on customers without any justification. The RTO-operated markets are not designed to achieve fuel diversity. The markets do need significant reform but the DOE proposal would take us in the wrong direction,” said Sue Kelly, president and CEO of the Association.

Our comments detailed several reasons the rule proposed by the Department of Energy would not work:

The proposed rule does not establish that premature retirement of fuel-secure generation resources presents an immediate reliability threat that must be addressed through a hastily defined rule.

There is no evidence that the proposed amendments to the FERC regulations would reasonably address the resilience concerns raised by the Secretary.

The proposed rule requires Regional Transmission Organizations and Independent System Operators to modify their tariffs without even considering the potential rate impact on consumers, contradicting the Federal Power Act.

The proposed rule presupposes the need for a very specific class of resources, and then proposes to pay them a cost-of-service rate without any meaningful analysis of whether those resources are actually required for system reliability or resilience.

We agree with the DOE that fuel diversity helps to enhance system reliability and resilience. As Energy Secretary Rick Perry pointed out, the organized markets operated by RTOs and ISOs are not well suited to address fuel security and diversity. But the proposed rule is not a reasonable approach to address these issues.

DOE has imposed impossible deadlines, directing FERC to act by December 11. As a result, FERC gave interested parties a far shorter comment period than for other significant proposed rules. The deadlines do not allow sufficient time for vetting and analysis of the proposal by interested parties and FERC itself.

FERC should undertake a process for RTOs and ISOs to evaluate what resource mix would maximize and ensure reliability and resilience, and to identify any current or projected shortfalls in these resources. Further, FERC should convene a technical conference to discuss the framework for such an evaluation. The conference would address the standards for resiliency, attributes and services needed by the RTOs and ISOs for reliability and resiliency, how current market rules affect these attributes and services, and other relevant topics.

We agree with DOE that the best way to accommodate a diverse mix of fuel resources in the wholesale markets warrants further discussion and analysis by stakeholders. We look forward to being a part of these discussions moving forward.